Recent genome-wide association studies have shown that genetic polymorphisms in the interferon-lambda gene are highly associated with viral clearance and treatment response. Furthermore variations in the inosine triphosphate pyrophosphatase (ITPA) gene have also been closely linked to ribavirin-induced anemia in other GWAS studies. We are genotyping our patient populations to further explore this genetic linkage and understand the functional relationship of these associations. Interferon (IFN) type III is the dominant hepatic interferon response in HCV infection. Polymorphisms in the IFN type III locus are associated with treatment response to pegylated-interferon and ribavirin and spontaneous HCV clearance. The newly discovered form of IFN (IFNL4) was linked to IFN type III and Interferon stimulated genes (ISGs). We studied the functional associations between polymorphisms in IFN type III locus (IFNL3), hepatic expression of IFNs and ISGs, and treatment response. Expression of type I IFNs (IFNA1, IFNB1), type II (IFNG), type III (IFNL1 IL29, IFNL2/3 IL28A/B, IFNL4) and ISGs were measured by qPCR in liver biopsies from 65 chronic hepatitis C (CHC) patients whose IFNL3-associated rs12989760 genotype was determined. Treatment-response analysis was limited to genotype 1 subjects. There was a robust correlation of hepatic expression within type I and type III IFNs, but no significant correlation between types. ISGs mRNA expression correlated with type III IFN and IFNL4 mRNA expression, but not with type I IFN mRNA expression. ISGs mRNA expression was lower in IFNL3 rs12979860CC compared to non-CC patients, and in treatment responders compared to non-responders. Of the IFN genes, only IFNL2/3 mRNA expression was significantly lower in CC patients compared to non-CC patients and in treatment responders compared to non-responders. IFNL4 transcripts were detected at low levels in 47% of the liver samples. Hepatic expression of ISGs in CHC patients is associated with type III IFN, particularly IFNL2/3 mRNA, suggesting that type III and not type I IFNs drive ISG expression in vivo. Hepatic IFNL2/3 expression is functionally linked to IFNL3 polymorphism, potentially explaining the tight association among ISG expression, IFNL3 genotype and treatment response.